On May 29, 2018, the D.C. Circuit asked the NLRB to explain – and justify – why it used a “clear and unmistakable waiver” standard when dealing with a Burns successor setting initial terms and conditions of employment, possibly offsetting its duty to bargain with a union in certain situations. As such, the court partially vacated an April 2017 Board decision holding that a successor employer, Tramont Manufacturing, LLC, violated the Act by laying off 12 workers without first notifying the employees’ union or bargaining over the effects of this layoff decision.

In 2014, Tramont, after acquiring the assets of a bankrupt company, decided to hire many of the predecessor employees and recognize the union, thus becoming a Burns successor. Tramont exercised its legal right as a Burns successor to set initial terms and conditions of employment by issuing an employee handbook that included a section covering layoffs. Then, in 2015, Tramont issued layoff notices to 12 employees without first notifying the union. The union attempted to bargain over the layoffs’ effects, but Tramont refused, which led to the subsequent filings of unfair labor practice charges with the NLRB.

In its ruling, the Board held that Tramont, in not notifying the union of these layoffs and refusing to bargain over its effects, violated the Act. In analyzing the case, the Board rejected Tramont’s argument that the “contract coverage” standard governed the lawfulness of this action and instead applied its “clear and unmistakable waiver” standard. Tramont appealed the decision.

Now, the D.C. Circuit has asked the Board to clarify and explain its use of the “clear and unmistakable waiver” standard when analyzing the bargaining obligations of a Burns successor in relation to the initial terms and conditions it is legally entitled to set. But, notably, the D.C. Circuit did not actually seem convinced that Tramont’s “contract coverage” standard should apply in place of the Board’s “clear and unmistakable waiver” standard:

Where…an employer seeks release from its statutory obligations on the basis of initial employment terms it has itself drafted… it would be perfectly reasonable for the Board to decide as a policy matter to construe those terms under a standard other than the one that would apply to the terms of a bargained for agreement.

Similarly, besides asking for an explanation, the court also opined on the soundness of the Board’s use of a “clear and unmistakable waiver” standard in this context. The court stated that it did not “see how employment terms unilaterally imposed by an employer could ever effect a waiver of bargaining rights by the union” and that “framing that standard in terms of waiver is far from intuitive.” Simply put, the court wants the Board to show their work and further explain why it applied this standard.

Lastly, even if the NLRB abandons its waiver standard in this context on remand, the court noted the Board may still decide that unilaterally imposed employment terms should be narrowly construed, thus leaving Tramont liable for violations under the Act. In this instance, the court asked the Board to respond to Tramont’s position that this outcome would counter Board precedent from 2001 that held a Burns successor did not have a bargaining obligation over the rate of pay offered to its new employees as part of initial terms and conditions it imposed.

In sum, whatever standard the Board decides to apply to the question of how far a Burns successor’s initial employment terms displace the duty to bargain with a union, it must clearly explain its reasoning for applying such standard. More significant, however, this decision will help both management and labor bars as employers and unions will better understand what conduct is legal and not legal under the established, but still evolving, successorship doctrine.

Carlos A. Torrejon is a former NLRB Attorney and an associate in the firm’s Labor and Employment Department, resident in its Morristown office.